Non-financial sector debt issuance in the GCC at 'highest level ever'

The stock of GCC bonds (both conventional and Sukuk) increased healthily during the first six months of the year. The private sector issuance maintained a strong pace and dominated the GCC’s fixed income activity.

The stock of outstanding GCC fixed income instruments rose to $239.8 billion at the end of 1H13, said the National Bank of Kuwait (NBK) in itslatest economic update[2]. The balance of outstanding bonds was up $19.2 billion thus far in 2013 and 15.3 per cent against a year ago. The largest debtors are the Qatari public sector (23 per cent), the UAE financial sector (16 per cent) and the UAE public sector (15 per cent). Among non-financial private issuers, the Saudi sector is the most active with 10 per cent of all outstanding GCC debt followed closely by the UAE.

Issuance picked up in the first half of this year. It was up 13.2 per cent compared to a year ago, with $30.1 billion worth of debt securities issued over the last six months. The UAE, Saudi Arabia, and Qatar accounted for 82 per cent of the issuance in 2013, with new debt of $11.6 billion, $8.0 billion, and $4.7 billion, respectively.

The non-financial sector (NFS) saw issuance increase threefold in 1H13, jumping $6.7 billion to $10.1 billion, its highest level ever. Coupled with issuance by the financial sector, the private sector experienced its strongest half yet, with gross issuance totalling $19 billion. In the UAE, most of the new debt was issued by financial institutions ($9.3 billion) and coincided with a recovering private sector and increased confidence. Saudi Arabia’s issuance activity was dominated by the non-financial sector, which was also the largest issuer in the region during the first six months of the year.

The private sector has been increasingly outperforming the public sector[3] over the last twelve months. Its stock of fixed income debt has grown by 25 per cent since last June, while outstanding public sector debt only saw an increase of 7 per cent over the same period. Its share of total new issues has also increased to 63 per cent in the first half of this year, well above the 30 per cent average observed for the first halves of the years from 2009 until 2012.

The average maturity of outstanding GCC debt securities remained steady at 5.8 years at the end of the first half of 2013. The public and financial sector converged to an average maturity of five years, while the non-financial sector saw a healthy jump of 0.6 years to 8.4 years in 1H13, said NBK